Can we create a global trade framework for health care R&D that

puts patients first?

James Love

Consumer Project on Technology

Washington, DC

Presented at the Fifth International Conference on Home and Community Care for Persons Living with HIV/AIDS

20 December 2001

Chiang Mai, Thailand

Examples of US trade pressures on Thailand

• May 12, 1988. US asks Thailand to grant up to 10 years of “exclusive marketing, manufacturing and import" rights on medicines.

• November 22, 1988. PMA writes “"if (the Thai Government) fail to act, we firmly believe that the removal of all or, at least, a substantial part of Thailand's GSP benefits by the US Government would be warranted.“

• May 5, 1993. US asks Thailand to abandon collection of economic data from the pharmaceutical companies, restrict compulsory licensing, and create non-patent system of pharmaceutical market exclusivity.

• December 2, 1997. US tells Thai government to change its patent legislation and "abolish the Pharmaceutical Review Board."

• March 31, 1999. USTR objects to new provisions in Thai law authorizing a compulsory license if the patent is deemed as not being locally "worked" or if the price is deemed unreasonably high."

Changes in Prices for Fluconazole in Thailand, following the introduction of

competition in 1998

200

6.5

020406080

100120140160180200

Thai Baht

Exclusive Marketing Rights After 9 months of Competition

February 7, 2000 letter, USTR Charlene Barshefsky to Supachai Panitchpakdi

• We recognize and support the Royal Thai Government's goal of extending effective health care to all its citizens - including those now living with HIV/AIDS. . .

• If the Royal Thai Government determines that issuing a compulsory license is required to address its health care crisis, the United States will raise no objection, provided the compulsory license is consistent with the provisions of the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS).

Doha Declaration

4. We agree that the TRIPS Agreement does not and should not prevent Members from taking measures to protect public health. Accordingly, while reiterating our commitment to the TRIPS Agreement, we affirm that the Agreement can and should be interpreted and implemented in a manner supportive of WTO Members' right to protect public health and, in particular, to promote access to medicines for all.

In this connection, we reaffirm the right of WTO Members to use, to the full, the provisions in the TRIPS Agreement, which provide flexibility for this purpose.

Competition is important in determining prices for medicines

Brazil purchases of generic 3TC drove down prices for raw materials

Price per kilo

$10,000

$700

$0

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

1999 2001

Annual cost of Nevirapine/3TC/d4T Cocktail

$9,825

$3,087

$737$250

$0$1,000$2,000$3,000$4,000$5,000$6,000$7,000$8,000$9,000

$10,000

BI/GSK/BMSUSA

RSA retailmay 2001

BI/GKS/BMS"donation"

Cipla 2001

Do drug companies register patents in Africa?

Seven Antiretroviral Drugs widely Patented in Africa

27 27 26 24

12 12 10

3733

25 24

1512

17

05

10152025303540

Combivi

r3T

C

Nevira

pine

Nelfin

avir

Acabav

ir

Ampre

navir

AZT

Num

ber

of C

ount

ries

und

er p

aten

t

PhRMAAttaran/IIPI

Where have big pharma filed blocking patents on ARV cocktails in sub-Saharan Africa?

Number of patents, based upon August 2001 PhRMA survey

17%

41%46%

56%53%

68%72%

87%

0%10%20%30%40%50%60%70%80%90%

100%

HIV+ Patients GDP

15+6+4+1_

What type of ARV cocktails are blocked the most?

• the least expensive to manufacture

• have the fewest compliance problems

What is compulsory licensing?

• When the government or a judge issues a non-voluntary license to use a patent.

Why is compulsory licensing important?

• Compulsory licensing can introduce competition and lower prices.

• Compulsory licensing can prevent a patent holder from blocking R&D and/or the development of new products.

Recent compulsory licensing cases

– USA Licenses required– 3D Systems (Sept 178 licenses)– Anderson Gene Patent (1 percent)– Miller tow truck patents– Monsanto Corn germplasm (150 Licenses)

– Other US cases– Exxon/Unocal clean fuel patent– Gemstar patents on interactive television.– Cipro (1498 case)

– Brazil licenses considered• Efavirenz (Sustiva/Stocrin), Nelfinavir

– South Africa• CIPLA request for patents on 3TC, AZT, AZT+3TC and

Nevirapine

Why do we have patents on medicines in the first place?

• Because we need to develop new health care technologies, and

• The patent is a mechanism to create incentives for private parties to invest in R&D

R&D for new products, as reported on US income tax returns

$175$190

$13 $14

$0$20$40$60$80

$100

$120$140$160$180$200

1997 1998

bill

ions

of

doll

ars

SalesR&D

Why do we have trade agreements that deal with patent rights on medicines?

• Because trade agreements are shaped by commercial interests, and Pfizer, BMS, Merck, GSK and other large pharmaceutical companies push to put pharmaceutical patents on the trade agenda

• Because there is a legitimate trade issue in determining who will pay for R&D

What is wrong with a trade agreement that focuses

exclusively on property rights for R&D?

There are lots of market failures in R&D

– Abuses of patent system• Excessive Prices on patented products• Anticompetitive patent strategies (evergreening, etc)

– There is too little investment in some areas:• Severe illnesses and Vaccines• Drugs for diseases that concern the poor• Basic research

– Patents can inhibit R&D• Excessive secrecy• Stem Cell Lines and other Research tools• Broad biotech patents• Blocking incremental innovations

Patents are only part of the picture

• Patents solve some problems

• But create problems of their own,

• And fail to address many R&D needs

What would a trade agreement look like if designed by public

health officials?

It would be different than the TRIPS

• Focus on innovation– Greater attention to outcomes and health care priorities– More transparency of investment flows

• Consider a wider range of instruments• Property rights would be a means, not an end• Public sector research would be addressed• Other tools to promote R&D would be considered

• Promote access to medicines, technology transfer and capacity building for R&D

• Greater attention to efficiency

Models for R&D trade frameworks

• Clinton/Blair agreement on funding sequencing of the human genome.

• G8 discussions on research for neglected diseases• Possible agreements on public access to journals• Proposals to let WHO use government funded

patents• Discussions on benefit sharing when R&D takes

place in developing countries• Harare proposal

Harare proposal

• Countries adopt systems of compulsory licensing of patents

• Royalties on patents paid into a health care R&D fund.

• Patent owners get shares in the fund.

• Fund invests in research projects which address local needs

US proposals for Research Mandates

• Cisplatin proposal

• Taxol Proposal

• Congressional proposals to increase health care R&D

How to begin a global dialog on trade and R&D?

• Hold meetings (or at least panels in meetings) to consider possible elements of a treaty on R&D

• Ask the WHO to begin discussion of alternative trade frameworks for R&D

Benefits of changes in trade debate

• Access and R&D no longer seen as mutually exclusive alternatives in trade debate

• Focus becomes how best to fund R&D, given public health objectives and ethical concerns

• More cost effective and efficient

For more information

http://www.cptech.org

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